Barrow Hanley Concentrated Global Share Fund Hedged, ARSN: 098 376 151 (Fund)

Following a recent refresh of the Pendal website, effective 31 July 2025, the click through steps required to access the Fund’s unit prices has changed as follows:

Unit Prices

Entry and exit prices for each Business Day will be available at www.pendalgroup.com by clicking on ‘Products’, selecting the Scheme, and clicking on ‘View fund information’. Click on ‘Prices and Distributions’ and then select the relevant class from the drop down menu. Prices will usually be posted by the end of the next Business Day.

Pendal Sustainable Balanced Fund, ARSN: 637 429 237 (Fund)

Following a recent refresh of the Pendal website, effective 12 August 2025, the click through steps required to access the Fund’s unit prices has changed as follows:

Unit Prices

Entry and exit prices for each Business Day will be available at www.pendalgroup.com by clicking on ‘Products’, selecting the Scheme, and clicking on ‘View fund information’. Click on ‘Prices and Distributions’ and then select the relevant class from the drop down menu. Prices will usually be posted by the end of the next Business Day.

Pendal Dynamic Income Fund, ARSN: 622 750 734 (Fund)

Following a recent refresh of the Pendal website, effective 12 August 2025, the click through steps required to access the Fund’s unit prices has changed as follows:

Unit Prices

Entry and exit prices for each Business Day will be available at www.pendalgroup.com by clicking on ‘Products’, selecting the Scheme, and clicking on ‘View fund information’. Click on ‘Prices and Distributions’ and then select the relevant class from the drop down menu. Prices will usually be posted by the end of the next Business Day.

Here are the main factors driving Australian equities this week, according to portfolio manager JIM TAYLOR. Reported by head investment specialist Chris Adams

• Find out about Pendal Focus Australian Share Fund

THE startling US jobs data from 1 August continues to set the tone for markets.

Large revisions to non-farm payroll data for previous months saw the three-month average monthly private sector jobs growth drop from ~150k to ~50k.

The resulting seasonally adjusted annual rate (SAAR) growth in private jobs of 1% versus the previous three months is a level rarely seen outside of times that the economy is either entering or exiting recession.

The market reacted quickly, shifting from a 37% to a 90% implied chance of a US rate cut in September. There is now an implied 57bps of cuts for the remainder of 2025, versus 40bps prior to the jobs release. 

This reflects the view that the US Federal Reserve will react to the material shift in recession risk that the jobs data revision embodies. Two Fed members – Mary Daly and Neel Kashkari – pivoted dovishly in their rhetoric in repose to the data.

Unease about recent Treasury auctions probably limited the benefit of the more dovish Fed positioning over the course of the week.

The combination of an increased chance of near-term rate cuts and a US reporting season coming in well above prior market estimates – and demonstrating the AI theme remains intact – saw equity markets heading back to all-time highs.

The S&P 500 gained 2.4% and the S&P/ASX 300 gained 1.7%.

Under the surface, dispersion of returns has been very significant, the spread of good and bad results has normalised, and volatility on results day (for poor results) is at new highs.

If the current setting of sub-par growth and inflation upside risk remains then we can expect a continuation of quality factor outperformance, though the extent may be limited by the current valuation premium.

Elsewhere, European Central Bank President Christine Lagarde flagged that EU rates “are in a good position”, suggesting a reasonably high bar for further cuts in the face of expectations that inflation will enter undershoot territory in 2H25.

The Bank of England required an historic second round of voting to achieve the 5-4 result required to cut rates 25bps.

This week is data-heavy in the US, with July CPI on Tuesday.

Goods prices will be under scrutiny amid expectations for tariffs to start having a more meaningful impact. The PPI will be out on Thursday, while retail sales for July and preliminary University of Michigan sentiment for August cap off the week on Friday.

US Federal Reserve

President Trump announced that he would nominate Stephen Miran, a former hedge fund executive turned top economic adviser, to fill the temporary vacancy on the Fed Board of Governors caused by the resignation of Adriana Kugler. 

Kugler’s term was due to end in January 2026.

Miran’s main focus has been on the overvaluation of the US dollar as a result of its role as the global reserve currency. The US dollar trade-weighted index fell 1.0% for the week.

Miran has also previously expressed a preference for shortening Fed member terms and allowing the President more scope for firing incumbents. He has also promoted the pro-growth and deflationary aspects of tariffs.

Christopher Waller is firming in the betting as the next Fed Chair, with a 29% chance versus 9% for Kevin Hassett and 6% for Kevin Warsh, though it appears a few more names have been added to the list of potential candidates over the last week or so.

San Francisco Fed President Daly took a turn towards the more dovish Fed faction of Waller and Michelle Bowman.

Daly noted that it could take six months to find out whether tariffs will push up inflation persistently, but that while she was “willing” to leave rates on hold last week, the slowing labour market sees her increasingly uncomfortable about making that same decision in upcoming meetings.

Minneapolis Fed President Kashkari followed suit, noting that “the economy is slowing, and that means in the near term it may become appropriate to start adjusting.” He stated that two quarter-percentage-point rate cuts by the end of the year would be reasonable.

 

Macro and policy US

When the Fed held rates steady in July, part of Chair Jay Powell’s justification was that employment data remained solid, based on the June report showing the three-month average monthly addition of 150,000 jobs.

Three days later, that 150,000 jobs was revised down to circa 50,000 – suggesting the situation is not so solid.

Over the last five months the Bureau of Labor Statistics has revised nearly 600k jobs away.

Post-revisions, US private employment has increased only 52k per month over the past three months, with gains stalling outside the health and education sectors. Government jobs actually fell 16K per month over this period.

Private payroll growth is now below 1% SAAR over the past three months. Since 1970, that has only been seen three times outside of periods leading into or out of recession – in 1995, in 2005 and this time last year.

This downshift in labour demand does not suggest we are seeing a slide into recession. There is still evidence of labour hoarding and credit conditions remain benign. But a stall speed alert has been sounded.

Given a heightened sensitivity to recession risk, the July labour market report is likely to have had a significant impact on the Fed’s thinking.

Elsewhere, initial jobless claims rose to 226K in the week ending 2 August, up from 219K and slightly above the consensus expectation of 222K. 

Initial claims have been within a range of 210-to-250K for the last year. However, a couple of leading indicators suggest we may return to the top end of that range soon.

First, labour firm Challenger, Gray and Christmas’s July measure of job cut announcements, excluding federal government, was 13% above its 2024 average. 

Also, the Cleveland Fed estimates that the number of layoffs notified in June WARN filings was 24% above the 2024 average.

Continuing jobless claims increased to 1,974k in the week ending 26 July, up from 1,936K the week before.

This is the highest level in four years and is further evidence that payrolls are rising below the pace required to keep the unemployment rate steady.

The current level suggests a roughly 0.2pp increase in the unemployment rate, which was reported as 4.2% just over a week ago.

This, alongside other indicators consistent with higher joblessness, suggest the unemployment rate will rise in coming months and may exceed the FOMC’s end-year forecast of 4.5%.

Macro and policy Australia

The focus this week will be the RBA’s August Monetary Policy decision – due on Tuesday – and the accompanying Statement on Monetary Policy.

The market overwhelmingly expects the RBA to cut the cash rate by 25bps to 3.60% in a unanimous decision.

We will also see updates on the labour market and wage growth.

Markets

US 2Q25 reporting season

With 90% of S&P 500 companies having reported, fears of a post-Liberation Day earnings rout have been squashed.

The blended earnings growth rate for Q2 S&P 500 EPS currently stands at 11.8%, well above the 4.9% expected at the end of the quarter.

Thus far 81% of companies have beaten consensus EPS expectations, versus a five-year average of 78%.

The blended revenue growth rate is 6.6% and 81% of companies have surpassed consensus sales expectations, better than five-year average of 70%.

In aggregate, companies which are beating expectations are doing so by 8.4%, which is better than the 6.3% average over the last four quarters, but below the five-year average of 9.1%.

Companies are reporting sales that are 2.4% above expectations, which is better than both the 0.9% one-year positive surprise rate and the five-year average of 2.1%.

56% of companies raised their full-year EPS guidance, versus a long-term average of 46%.

Looking at year-to-date returns from the S&P 500, the market cap-weighted return has been 9.5%, but the median S&P 500 stock has only returned 3% and remains 12% off its 52-week high.

At the top end of the distribution, a basket of AI-exposed equities has returned 26%, among the strongest of any investment theme. The market has also rewarded themes such as cyclicals outperforming defensives and large caps outperforming small caps.

There has been divergence within themes. Among defensives, for example, the AI-exposed Utilities sector has done well while Health Care has lagged. Within cyclicals, commodity-exposed sectors like Energy and Materials have lagged other areas like Industrials.

 

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About Jim Taylor and Pendal Focus Australian Share Fund

Drawing on more than 25 years of experience investing in top-performing Australian companies and a background in accounting, Jim manages our Long/Short Fund and co-manages our Imputation Fund. He is a Chartered Accountant with membership of the Australian Institute of Chartered Accountants.

Pendal Focus Australian Share Fund is managed by Crispin Murray. The fund has beaten its benchmark in 14 years of its 18-year history (after fees), across a range of market conditions. Find out more about Pendal Focus Australian Share Fund here.

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management. 

Contact a Pendal key account manager here

Outlook for US inflation | What’s driving equities? | Be cautious with Korean equities

Here are the main factors driving the ASX this week, according to Pendal investment analyst JACK GABB. Reported by portfolio specialist Chris Adams

• Find out about Pendal Focus Australian Share fund
• Watch now: Crispin Murray’s bi-annual Beyond The Numbers ASX outlook

IT was a macro-heavy week, with the Federal Reserve’s expected decision to hold rates steady taking centre stage, while a subsequent data print revealed cracks in the labour market.

The bulk of US reporting season continued, with US tech stock earnings mostly exceeding expectations, further underpinning the push into AI.

It was also a big week for tariffs, with the overall rate now at 18% and implementation now being delayed to 7 August.

In Australia, CPI came in lower and cemented expectations for a rate cut on 12 August.

In China, the July Politburo meeting was muted, with potential stimulus measures deferred.

As a result, the S&P/ASX 300 fell slightly by 0.01% for the week, faring better than the S&P 500’s 2.34% decline.

US macro and policy

It was a big week on the macro front, with the Fed meeting front and centre. Rates were kept on hold, as expected, but commentary from Powell was interpreted as less dovish.

That initially drove down September rate cut expectations from 68% to 43%, before weaker-than-expected labour market data on Friday drove a sharp reversal back to 87%.

But bad news is good news for equities, as the expectation of a September cut is now well above 90%.

On outlook, there was little change to the FOMC statement and no change to forward guidance. In the press conference, Chairman Powell said that the economy “is not performing as though restrictive policy is holding it back inappropriately”.

He also mentioned the labour market is in balance (but with downside risk), inflation remains above target, and we are only at the early stages of tariff pass-through to inflation.

In summary, maintaining “modestly restrictive” policy “seems appropriate” for now, in his view.

Unfortunately, that view was immediately challenged by Friday’s labour market data. July payrolls were 73k versus expectations of 104k. More importantly, May and June saw large downward revisions (125k and 133k, respectively).

The unemployment rate, which Powell is more focused on than NFPs (non-farm payrolls), also ticked up to 4.25% from 4.12%. Most other data also came in weaker, which combined to drive September rate cut expectations sharply higher. The dollar also partially reversed its recent rebound.

The credibility of recent data came under scrutiny by President Trump, firing the head of the Bureau of Labor Statistics hours after its release. “Important numbers like this must be fair and accurate; they can’t be manipulated for political purposes,” Trump stated.

While this change is unlikely to have a significant impact, Trump has another opportunity with the Federal Reserve. Governor Kugler, who missed the July meeting, announced her resignation six months ahead of schedule.

This vacancy is seen as potentially accelerating the selection of the next Chair, with the appointee possibly acting as a shadow Chair until Powell’s term ends next year. This view is reinforced by Trump’s continued criticism of Powell over past weeks.

According to Polymarket odds, Kevin Warsh is the leading candidate for the next Chair, followed by Kevin Hassett and Chris Waller.

Whoever it ends up to be, the addition is likely to add to pressure to cut given the two dissenters at the July meeting are Trump appointees.

Interestingly it was also the first double dissent since 1993.

In other economic news, US GDP saw a beat, although the data was significantly influenced by fluctuations in net exports due to tariffs which reversed the trend seen in Q1.

Tariffs

With the labour market showing some cracks, inflation remains the primary obstacle to a September cut, with two CPI prints due between now and the next FED meeting.

Tariff outcomes are crucial in the near term, as the current CPI composition has shifted towards goods and insurance rather than services.

Last week, Trump announced an updated list of reciprocal tariffs, with the overall rate expected to land at 18%, up from 2% at the start of the year and closer to 30% on Liberation Day.

The US market has largely shrugged off new measures, particularly given subsequent adjustments. Even Powell noted that tariff effects on inflation might be short-lived as “one-time base effects”.

However, with worsening jobs data and signs of a spending slowdown, the potential impact of tariffs cannot be ignored.

One challenge for the Fed is the lag between when tariffs are agreed and when they show up in goods prices. According to Powell, most tariffs are currently being paid upstream by companies rather than consumers.

This is unlikely to last however as based on Fed surveys, companies will eventually pass on the additional costs, meaning the full impact on consumers is yet to be seen. Budget tax cuts may help, partially funded by $30bn per month in tariff collections, but it is unclear if this will be sufficient.

It is also worth noting the risk that if/when the Fed next cuts rates, mortgage rates may not fall as Bloomberg has highlighted during last year’s cuts.

US reporting season

Outside of macro data it was a big week for US earnings, particularly within the tech sector.

We are now two-thirds of the way through Q2 reporting season with over 80% of companies having reported a positive EPS surprise. Year-on-year earnings growth is also averaging over 10%.

Despite the generally strong results, the S&P 500 finished down over 2%, with only the utilities and communications sector posting gains.

The overall drop in the S&P masked reporting beats by AI bellwether stocks Microsoft and Meta:

• Microsoft beat expectations with EPS of $3.65 vs. $3.37 expected and projected next year’s capex to exceed $100bn, a 14% increase year-over-year.
• Meta also exceeded expectations, driven by ad growth and AI, forecasting 2026 capex at $97bn vs. $68bn in 2025.
• Amazon’s results were less impressive, but the company is increasing spending, citing the early stages of AI development. The CEO emphasised the need to build capacity to meet customer needs and highlighted electricity supply as a constraint for expanding cloud services.

Outside of tech, the earnings were more mixed:

• UPS missed earnings and withdrew FY guidance amid macro uncertainty, with Q2 volumes falling 7.3% to 16.6 million packages – worse than Q1.

• United Health continued to struggle with rising medical costs. This trend prompting Trump to ask 17 major pharmaceutical companies to slash prescription drug prices to match those overseas. Companies have until September 29^th to respond.
• Southwest Airlines lowered FY profit guidance to $0.6-0.8bn from $1.7bn at the start of the year. However, domestic leisure travel stabilised in Q2, though business travel remains down due to government spending cuts.

This tale of two markets was underscored by the underperformance of the Russell 2000 which was down -4.2%.

While the AI narrative appears on firm footing, consumer and tariff exposed sectors appear more fragile. As such a two-tier market appears likely to persist for some time.

Commodities

Moving to commodities, materials was the weakest sector, reversing much of the previous week’s gains.

Energy was the one bright spot, with LNG benefiting from pledges to buy more from the US as part of trade deal negotiations.

Oil also gained, but over the weekend, OPEC+ agreed to a 548k barrels per day increase in September. This move appears aimed at reclaiming market share but likely adds to a forecast global surplus later this year.

Most metals retreated, with copper on Comex seeing the most dramatic fall after Trump reversed tariffs on refined products, which constitute the vast majority of copper imports.

Lithium also saw a sharp reversal of recent gains, with equities following suit. Speculation around material supply interruption in China has, thus far, not been substantiated.

China

China equities ended the week lower, with the key July Politburo meeting offering little new information. 

Rather, it emphasised the implementation of existing policies, which arguably reflects the fact that growth YTD has exceeded the official target and US-China tariff risks have reduced.

The so-called ‘involution-style’ competition did not attract much comment, with official guidelines deferred to later in the year. However, subsequent releases quoted Xi as vowing to “break involution,” indicating that policies to reverse deflation are likely to continue.

As a case in point, we saw announcements from Meituan and Alibaba aiming to curb disorderly price competition and GCL Technology to shut a third of its solar-related production capacity during the week.

There was no boost to real estate, which was a slight surprise given weakness has re-emerged since April. The commentary there was centred on delivery of high-quality urban renewal programmes, which the market believes are unlikely to deliver meaningful change.

Overall, the meeting contained few surprises, with the shift towards structural rebalancing (anti-involution; boosting consumption) still in progress. As such, expectations for additional stimulus are likely pushed back to late Q3/early Q4, coinciding with the 4th Plenum in October where the next five-year plan with be detailed. 

Similarly, expectations for additional rate cuts have been delayed, with the Politburo statement removing the April meeting’s wording about cutting policy rates and reserve requirement ratios at the appropriate time.

This has been interpreted as pushing the timing of additional cuts to Q4 when growth pressures are expected to re-emerge, which could see the resource sector remain stagnant until then.

Backing up the wait-and-see approach is a likely further delay in the implementation of US-China tariffs, with a meeting in Stockholm agreeing a 90-day delay (to mid-November), albeit this remains subject to Trump approval.

The risk here is that there could be degradation over August/September – similar to 2024. Factory output remains weak with manufacturing PMI down 49.3 in July from 49.7 in June, and port traffic is coming off highs – potentially indicating an end to front-loading ahead of tariffs.

Property also remains weak, with China’s top 100 developers seeing their combined value of new home sales dropping 24% year-over-year in July. Sales also fell 38% from June.

Australia

Domestically, the main news was the softer than expected CPI, leading to a ~100% chance of a 25bps cut later this month and over two cuts by November, up from the start of the week.

Q2 CPI printed at 2.1% year-on-year vs. 2.2% expected and 2.4% prior. June CPI was 1.9% year-on-year vs. 2.1% expected.

Quarter-on-quarter CPI was 0.7% vs. 0.8% expected and 0.9% prior. Tobacco added 2% due to biannual indexation which was last applied 1 March, with alcohol and tobacco comprising 6.58% of the CPI weight.

Support for a cut this month looks more assured after the Reserve Bank deputy governor noted the previous shock decision should be viewed as an unusual occurrence. He also said cash rate decisions should be predictable and in line with market expectations.

Australian equities ended largely flat with the S&P/ASX 300 returning -0.01%, reversing the sector moves from the previous week.

The strength in Consumer Discretionary (+2.4%), Industrials (+1.5%), and Financials (+1.5%) offset the weaker Energy (-1.9%) and Materials (-4.0%).

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About Jack Gabb and Pendal Focus Australian Share Fund

Jack is an investment analyst with Pendal’s Australian equities team. He has more than 14 years of industry experience across European, Canadian and Australian markets.

Prior to joining Pendal, Jack worked at Bank of America Merrill Lynch where he co-led the firm’s research coverage of Australian mining companies.

Pendal’s Focus Australian Share Fund has an 18-year track record across varying market conditions. It features our highest conviction ideas and drives alpha from stock insight over style or thematic exposures.

The fund is led by Pendal’s head of equities, Crispin Murray. Crispin has more than 27 years of investment experience and leads one of the largest equities teams in Australia.

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management. 

Find out more about Pendal Focus Australian Share Fund  

Contact a Pendal key account manager

 

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Tariffs will show up either in inflation or corporate earnings — but the implications are starkly different for portfolio decisions, argues Pendal’s head of income strategies AMY XIE PATRICK

• Three straight quarters of falling earnings growth in the US
• Key watchpoints: contract-roll offs, earnings revisions, China’s Politburo meeting
• Find out about Amy Xie Patrick’s Pendal Monthly Income Plus fund

TARIFFS will show up either in inflation or corporate earnings — but the implications are starkly different for portfolio decisions.

Despite higher input costs from new tariffs, US consumer inflation has barely budged.

The reason? Contract lags in supply chains and Chinese producers absorbing the pain. The first offset may not last — but markets have yet to price in what happens if they do.

That’s why Pendal has already booked profits and dialled down risk in our income strategies, including trimming equity allocations.

With market optimism still running high, the risk-reward is less compelling, so we’re keeping our powder  dry for better entry points.

Tariffs and inflation: the missing pass-through

Since Donald Trump’s “Liberation Day” in APril, tariff pass-through into US CPI has been far weaker than most expected.

Historically, US inflation surprises and actual inflation have moved together (see the graph below). This time, they’ve diverged sharply.

Where are the tariffs?

Purchasing manager surveys show input prices rising (see below)  — a sign that tariffs are indeed biting at the producer level.

Normally, higher input costs push up consumer prices. This time, the relationship has broken down.

Feeling the pressure: Purchasing managers on input prices & US CPI

One likely reason: existing contract prices in supply chains. Sellers may want to raise prices, and buyers may be willing to accept them, but until contracts reset, pass-through to CPI is limited.

This delay won’t last forever.

When contracts roll off, either producers absorb the cost hit or they pass it on. Either way, corporate earnings are at risk.

While the current earnings season for the S&P 500 has been solid, the trend is heading down: three straight quarters of falling earnings growth, as you can see in the graph below.

The market has yet to price-in the “pinch”

China’s ‘anti-involution’ policy: a structural challenge

It turns out Chinese producers have been absorbing a lot of the pain, and since before Trump’s election odds were sealed in 2024.

China’s Producer Price Index (PPI) has diverged from commodity prices, suggesting heavy discounting even as input costs rise, as you can see below.

Heavy discounting

This points to a bigger structural problem: overcapacity.

In solar panels, China’s supply is more than twice global demand. In EV batteries, supply exceeds demand by 30 per cent — figures highlighted in a recent Morgan Stanley report.

Beijing’s “anti-involution” policy — essentially, a campaign to stop companies from undercutting each other — faces an uphill battle when too much capacity is chasing too little demand.

(Involution refers to a state of intense, often unproductive competition that leads to diminishing returns and economic stagnation.)

As China struggles with deflationary forces, the US may continue to see muted effects from tariffs in CPI.

Bottom line for portfolios

Whether tariffs show up in US CPI — and for how long — matters for both bonds and equities.

If bonds fear a more serious inflation problem, it also won’t be good news for equities.

On the other hand, if US corporates fail to pass tariffs on for whatever reason and margins become compressed, the near-term implication would be a pull-back in equity markets.

After all, analysts have maintained expectations for earnings growth to accelerate in coming quarters.

Key watchpoints include contract-roll offs, earnings revisions and China’s upcoming Politburo meeting.

Pendal Global Emerging Markets Opportunities Fund (APIR: BTA0419AU, ARSN: 159 605 811)

Pendal Global Select Fund (APIR: PDL6767AU (Class R), PDL4472AU (Class W), ARSN: 651 789 678)

(each a Fund).

Effective 1 August 2025, the buy-sell spread for the Pendal Global Emerging Markets Opportunities Fund and the Pendal Global Select Fund (Class R and Class W) will decrease to reflect a reduction in the Funds’ transaction costs. 

The buy-sell spread for each Fund will decrease as set out in the table below:

Table 1: Old and New Buy-Sell Spreads

Fund Name	Old (%)		New (%)
	Buy	Sell	Buy	Sell
Pendal Global Emerging Markets Opportunities Fund	0.30%	0.30%	0.25%	0.25%
Pendal Global Select Fund- Class R	0.20%	0.20%	0.15%	0.15%
Pendal Global Select Fund- Class W	0.20%	0.20%	0.15%	0.15%

More about buy-sell spreads

The buy-sell spread is an additional cost to you and is generally incurred whenever you invest in or withdraw from a Fund. The buy-sell spread is retained by the Fund (it is not a fee paid to us) and represents a contribution to the transaction costs incurred by the Fund such as brokerage and stamp duty, when the Fund is purchasing and selling assets.

The buy-sell spread also reflects the market impact of buying and selling the underlying securities in the market. Importantly, the buy-sell spread helps to ensure different unit holders are being treated fairly by attributing the costs of trading securities to those unit holders who are buying and selling units in the Fund.

As transaction costs may change depending on various factors such as market conditions and brokerage costs, buy-sell spreads may also change without prior notice. You should, therefore, review each Fund’s current buy-sell spread before making a decision to invest or withdraw from a Fund.

For the latest buy-sell information, please refer to our website www.pendalgroup.com, click ‘Products’, select the relevant Fund and click on ‘View fund information’.

Notice of Termination:

Regnan Global Equity Impact Solutions Fund Class R (APIR: PDL4608AU ARSN: 645 981 853)

Regnan Global Equity Impact Solutions Fund Class W (APIR: PDL7011AU ARSN: 645 981 853)

The Regnan Global Equity Impact Solutions Fund (Fund) will terminate on Wednesday, 30 July 2025.

Why is the Fund terminating?

We regularly review our product offerings and investment capabilities to ensure that our business continues to maintain a product suite that remains viable and relevant to our investor demands.

After careful consideration, we have determined that terminating the Fund is in the best interests of investors.

The Fund’s small size means that it has high running costs and cannot be managed in a cost efficient way.

We also consider that the Fund has little prospect of significant growth in funds under management in the foreseeable future. If the Fund were to continue, the Fund’s size would result in higher management costs for investors, which would reduce their investment returns.

How this affects you?

As the decision to terminate the Fund has been made, applications, transfers and withdrawals will not be accepted after 2:00pm (Sydney time) on Wednesday, 30 July 2025.

What happens next?

Following the Fund’s termination on Wednesday, 30 July 2025, we will begin to wind up the Fund. The assets of the Fund will be sold and the net proceeds of winding up will be paid to all investors in proportion to their unit holding.

What does this mean for you?

Your pro-rata share of the net cash proceeds from this termination will be paid directly to your nominated bank account on file on or around the week commencing Monday, 11 August 2025 or shortly thereafter.

Details of the distribution paid to you prior to the termination of the Fund will be included in your 2026 AMIT Member Annual (AMMA) statement. This statement will set out the components of the distribution. It will be issued to you following the 30 June 2026 financial year.

Questions?

If you have any questions, please contact our Investor Relations Team during business hours on 1300 346 821.

Here are the main factors driving the ASX this week according to Pendal investment analyst ANTHONY MORAN. Reported by portfolio specialist Chris Adams

• Find out about Pendal Focus Australian Share fund

NEWS on trade deals, combined with a strong reporting season so far, is seeing US equities hit fresh highs.

The S&P 500 gained 1.5% last week and is up 9.4% for the year.

Domestically, the S&P/ASX 300 shed 1% in a week dominated by a rotation into resources, which were up 2.7%.

Macro news was very light with greater focus on US reporting season and modest moves in bond yields. US 10-year Treasury yields fell 4bps to 4.38%.

Bulk commodities and metal prices were generally stronger on positive China newsflow. Iron ore rose 1.4% and copper 3.3%, though oil eased back, with Brent crude down 1.2% to US$68.44.

US policy and macro: a relatively quiet week

US housing data was a little softer, with new home sales down 7% year-on-year. They were up 1% month-on-month, but this was 4% below consensus expectations.

Existing home sales were flat year-on-year but down 3% month-on-month, slightly missing consensus expectation of -1%.

This continues a run of soggy housing data, following weaker new housing starts last week. While the data has been weak, a sharp rally in homebuilders earlier last week suggests it has not been as bad as feared.

Inventory for new and existing homes has risen sharply, putting downward pressure on US home prices.

There is now more than four months of supply in existing homes on the market – the highest level in five years. This increased appetite to sell homes is challenged by affordability, suggesting prices have to fall.

Mortgage purchase applications rose 3.5% for the week and the last four weeks are up 20% year-on-year. This offers some hope of a pick-up in home purchasing activity, but purchase applications have been rising for a few months now and this is yet to show up in activity.

Elsewhere, US manufacturing continues to be a bit softer with the Richmond Fed Manufacturing index falling 12 points month-on-month to -20, well below the -2 expected.

The S&P Manufacturing purchasing manager’s index (PMI) fell from 52.9 in June to 49.5 in July, versus 52.7 expected. This was slightly offset by the Services PMI, which rose from 52.9 to 55.2, beating consensus expectations of 53.

On the positive side, Durable Goods orders came in better at +0.2% month-on-month in June – compared to 0.1% expected – and US initial jobless claims fell for a sixth straight week to 217k, from 221k the week before and better than the 226k expected. Continuing claims were relatively flat.

The upshot is that the macro news was largely neutral in effect, with bond yields basically flat for the week. The US economy is slowing into 2H CY2025, but not enough to derail the market.

Trade update

Positive momentum on trade deals drove a large part of strong market sentiment last week.

The big news was a deal with Japan – with a 15% tariff on exports to the US. This saw a 4.3% gain in the Japanese share market.

The US and the EU also reached a deal over the weekend, likewise with a 15% tariff rate. This is important given that roughly 20% of US imports are sourced from the EU.

There is speculation that a Korea deal will shortly follow. Japan and Korea are about 5% of US imports each.

Minor deals with Philippines and Indonesia – with a 19% tariff – were also announced.

Most details of the trade deals are vague, but from what we know it looks like the weighted average effective tariff rates won’t move much versus today’s levels.

In Japan’s case the effective rate post deal actually comes down, as tariffs on autos and auto parts are reduced from 25% to 15%. This is helping reduce the tail risk of higher-than-expected tariffs.

Tariffs and inflation

While effective tariff rates are not worse than feared, it will still increase over the year and the impact on inflation will build.

Goldman Sachs have increased their forecast for the effective tariff rate to 17% by the end of 2027, versus 14% previously.

On the positive side, they also noted that the pass-through of tariffs to consumer prices is tracking lower than the last round of tariffs in 2019. After four months from the earliest tariffs imposed on China in February, they measure the pass-through at around 60%.

Surveys that ask businesses how much they intend to eventually raise prices also indicate a lower pass-through than last time. This is partly due to the exporters absorbing some of the tariff impost and also some being absorbed by US businesses.

Tariff effects came through in the June consumer price index (CPI) – with the notable exception of the autos category – and appear to have now boosted prices by 0.2% cumulatively.

We also note that excluding the effect of tariffs, US inflation is looking softer than expected. The Goldman Sachs view is that the underlying CPI trend is moving down towards 2%, particularly as shelter inflation slows, but the tariff effect will push core personal consumption expenditures (PCE) inflation to 3.3% by the end of 2025, before fading in 2026-27.

Although the US economy has held up pretty well in 1H CY2025, real consumer expenditures have taken a hit and building tariff impacts in 2H are a risk. A key question is to what degree the resolution of uncertainty will offset the tariff burden on consumers.

The direction of interest rates will depend on the Fed’s willingness to look through the effect of tariffs in inflation. This may be assisted by the slowing underlying rate, a lower pass-through of tariffs and jawboning by the government.

A final point on interest rates: tariff revenues are growing rapidly and will rise higher as the year progresses. Against a budget deficit of about $1.3 trillion these receipts are a meaningful offset and may provide some relief for the long end of the bond yield curve.

Australia policy and macro

While Australian mortgage holders have been in the grips of rate cut mania, RBA Governor Michelle Bullock suggested we should be cautious about how far they can cut, given the labour market still shows signs of tightness.

She noted that firms are still reporting significant difficulties in finding labour and the vacancies-to-unemployment ratio is still high. Unit labour costs have also been growing strongly.

The rapid response of Australian house prices to rate cuts won’t help either.

While it is reasonable to expect a couple more rate cuts this year we are mindful that there may not be much scope to cut beyond that.

Europe policy and macro

The ECB kept rates on hold at 2% last week and suggested they are comfortable with current monetary settings and are in “wait and watch mode” noting “the economy has proven resilient” which saw EU bond yields rise. The EU PMI came in line with expectations this week, supporting the ECB’s view, but there was some softer data with consumer confidence in Germany and the UK both declining and UK’s PMI missing expectations.

Markets

Resources rally

Last week saw the strong run for commodity prices and resource equities continue, boosted by further newsflow from China and short covering, although it gave some back on Friday

The scale of the recent rotation into resources and away from financials (which appear to be funding the trade) has been sharp.

However it remains small relative to longer-term underperformance from Resources. This has raised expectations from some parts of the market that there could be a long way to run for the sector.

An example of this thinking is Fortescue (FMG), which hit $27 when iron ore breached US$110/t a year ago. Today, FMG is around $18.

But looking at the longer-term underperformance of Resources versus Financials, we note a series of reversals in recent years which ultimately returned to the negative trend – for example we had a similar scale recovery in September 2024 on stimulus hopes.

There have been a number of factors contributing to this rally, including:

• Over the last four weeks iron ore is up from US$93/t to US$104/t, coking coal up from US$180/t to US$195/t and lithium up from US$8,000/t to US$8,450/t.
• There’s been a plethora of news out of China on the sector:
  • Further detail on capacity rationalisation or “anti-involution” policy – the Chinese Ministry of Industry and Information Technology said that they are targeting “structural adjustment”, “supply optimisation”, and “elimination of obsolete capacity” in industries including steel, base metals, petro-chemicals and construction materials.
  • Hopes of further property stimulus have also been raised, including a property sector summit with President Xi last week.
  • The China Iron and Steel Association held meetings with executives from key steel producers, with participants vowing to step up efforts to curb “involution” and study setting up a new system to curb overcapacity in the sector. We note no steel capacity cuts have materialised yet.
  • Sentiment was further boosted by the announcement Premier Li Qiang launched construction of the US$167bn mega dam in Tibet on the Yarlung Tsangpo River – the actual contribution to metals demand is modest, but has lifted hopes up a broader step up in infrastructure investment.
  • China’s National Energy Agency will require the country’s top coal-producing provinces (accounting for >90% of total production) to conduct inspections on potential overproduction among coal miners, helping sentiment towards coal prices.
  • The lithium price has risen on the back of capacity cuts out of China, with temporary closures due to low prices and licensing issues, with two suppliers being forced to suspend production. There is speculation of broader production suspensions as a result of this licensing issue, but this has been wild at times with stories being reported and retracted within hours. The reality is that the lithium market remains heavily oversupplied with new capacity coming on and long-term price expectations are too high.
  • Chinese authorities are also cracking down on rare earths, vowing ‘zero tolerance’ for the smuggling of strategic minerals and unauthorised transfer of related technology.

Moves have been exaggerated by short covering, with the market having been heavily short in steel and coking coal. Positioning has moved from max short to modest long over the past two-to-three weeks. Chinese hot-rolled coil (HRC) steel prices are up 8% in the last three weeks.

The rally in iron ore prices is surprising given the driver is purported steel capacity cuts. But the thinking is that this could increase steel margins and, in turn, drive higher raw materials prices. In the short term this seems to be playing out as Chinese steel margins have expanded and steel mills are actively restocking iron ore.

However once the restock completes we would expect supply/demand fundamentals to reassert themselves in 2H25 when iron ore supply increases and Chinese steel demand eases due to seasonality and, potentially, capacity cuts.

At some point we should see a positive demand response from looser monetary policy in China with Total Social Financing running at +9% year-on-year, but this is a pretty soft impulse compared to historical stimulus.

When we look at the fundamentals, of which supply/demand in iron ore is a good example, we are cautious about this run for the sector continuing – but recent events may signal the end of the long bear market in resources.

US Reporting Season takeaways

We are in the thick of reporting season in the US. With about 30% of the S&P 500 having reported, the ratio of companies beating expectations in the US is running at 88%. This is the strongest rate since 2Q 2021, but with the S&P up +32% since the April low the market really needs to see these beats.

Earnings beats are being driven by Tech, Financials and Commercial Services; while the ratio is much lower in Materials and Consumer Discretionary.
Beats are driven more by margins than sales, suggesting tariff impacts haven’t hurt much yet.

Some notable results:

• Alphabet (+2%); cloud revenue accelerated from 28% to 32% in 2Q, ahead of expectations. The backlog is up 38%, so growth acceleration should continue, coming from both cloud and AI workloads. Capex is up from $75bn to $85bn and management guided for that number going up in 2026, which is a positive read-through for Data Centres & AI.
• GE Vernova (+15%), which makes energy equipment, beat 2Q expectations and increased guidance for 2025. They saw a 44% increase in orders for gas power equipment, with revenue in their Electrification segment grew +23%. The backlog of equipment orders grew over US$2b from last quarter, with more than 10% growth from Europe, North America and Asia. This company is leveraged to the energy and AI infrastructure spending boom – and is the proverbial store selling shovels in a gold rush.
• The market had little patience for companies seen as tariff losers. General Motors fell over 8% despite a small Q2 EBIT beat and reiterating FY guidance – the market focused on a margin/EBIT miss in North America, where they were hit with ~ US$1.1b impact from tariff costs in Q2 and warned of a further US$3-4b hit this year. In Europe, Nokia fell almost 8% after it cut its operating profit guidance range and warned of a potential €310m hit to the 2025 outlook from FX fluctuations and U.S. tariffs.
• There was a big rally in US homebuilders early in the week after a strong EPS beat by DR Horton (the largest US homebuilder) with closings, margins and new orders not as bad than feared after recent weak commentary on the US housing market. This raised hopes that the worst of the new housing cycle and destocking is now behind the sector.
• Chipotle (-11%) cut its same-store-sales (SSS) forecast for the second time this year, now expecting flat SSS versus low single-digit growth prior. This highlights the challenged environment quick service restaurants (QSR) have been in globally as consumers have dealt with cost of living pressures. However we could be past the worst of it, after a -4% drop in SSS in 1H Chipotle has seen a return to positive comps in July. This drove weakness in the whole QSR sector.
• Airlines were weak. American Airlines (-9.6%) scaled back its earnings outlook with management suggesting Q3 will be tough, with a challenged start in July. Southwest Airlines (-11.2%) lowered FY profit guidance and flagged a US$1b+ hit to pre-tax profit this year from economic turmoil. The key issue was weaker low-end domestic demand.

This week will be big for tech, with Amazon, Apple, Meta and Microsoft all reporting.

Market Positioning

Markets are at elevated levels, but appear justified by the level of earnings beats we are seeing in the US.

One of the notable recent factors in the US has been aggressive buying of cash equities by retail participants – we have seen the longest buying streak (19 days) in the last four years. Sharp increases in speculative trading are a positive short term signal for markets.

Despite strong market performance, investor sentiment remains pretty neutral according to the AAII bull-bear investor sentiment survey.

Market breadth is also improving after a sharp decline post liberation day

The upshot is that despite the strong rally, markets still look well supported by technicals. But given elevated levels, the market needs a strong earnings season to continue, with the upcoming week being a big one for US Tech, and continued trade deal resolution.

With a slightly slowing economy, and consumers to take a hit from tariffs, it will be important to make sure 2H earnings outlooks are reasonable.

Australian market

The Australian market declined during the week, which was a function of the rotation away from Banks (-4.3%) into Resources (+2.7%), with the big unwind in the banks dragging down the indices.

Healthcare (+2.1%) had a good week on the back of the rally in CSL (CSL, +4.1%) – and the US health care sector was also up strongly after being the worst-performing sector year-to-date.

Energy (+3.9%) was boosted by a strong quarterly from Woodside (WDS, +7.4%), lithium stocks were up sharply while REITS (-1.3%) were not helped by the rise in the 2 year bond yield in Australia.

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About Anthony Moran

Anthony Moran is an analyst with over 15 years of experience covering a range of Australian and international sectors. His sector coverage has included Australian Industrials and Energy, Building Materials, Capital Goods, Engineering & Construction, Transport, Telcos, REITs, Utilities and Infrastructure.

He has previously worked as an equity analyst for AllianceBernstein and Macquarie Group, spending a further two years as a management consultant at Port Jackson Partners and two years as an institutional research sales executive with Deutsche Bank.

Anthony is a CFA Charterholder and holds bachelor’s degrees in Commerce and Law from the University of Sydney.

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